Manufacturing Back to the US?

If fuel prices continue to increase, one industry that might start to see a benefit is the long said to be moribund US manufacturing industry. With the cost of oil continuing to skyrocket, the cost of transportation from far overseas - particularly China - has gone up from negligible numbers to eye popping amounts. This could signal a turn towards manufacturing coming back to the US and South America as wages overseas go up relative to the weakening US dollar and the fuel costs erode the other cost savings of deregulated markets.

While the overall current picture of US manufacturing remains bleak with massive layoffs hitting the auto industry in particular, in other sectors things could start to look up. Increasing costs overseas due to demands for higher wages and environmental regulations in China have also made it less attractive, as have the health related scares that have repeatedly cropped up in the media over imported goods. While the shift may not happen overnight, if current trends continue, the US manufacturing sector could find itself enjoying a new renaissance.

If this shift does happen substantially, it will happen over the course of decades as the manufacturing commercial network regrows, and infrastructure is put in to support it. Proximity to end markets is now suddenly an important thing for manufacturers, particularly as oil flirts with $140 and analysts project $200 per barrel by the end of the year. Mexico could even be too distant for some manufacturers, particularly those who deal in heavy, expensive to transport goods.